APD rate for business jets to rise from x4 standard up to x6 by April 2015, while Treasury receipts from APD fall by £250 million by 2019

Date added: March 20, 2014

The changes to APD in the budget include 3 components; for the next 2 years the rates of APD for Band A (up to 2,000 miles) at £13 and Band B (2,000 to 4,000 miles from London) at £67 continue to rise at the rate of RPI; after April 2015 APD for distances further than 4,000 miles will be at the Band B rate of just £71; and private jets will after April 2015 pay APD at 6 times the rate for standard passengers, up from 4 times the rate in 2014 (and 2 times the rate in 2013). That is to be welcomed. There were some 228 million UK air passengers in 2013, of whom some 120 million were to Europe, some 69 million were to longer haul destinations, and some 38 million were domestic. Of the long haul passengers, some 20 million were to Band C and D destinations (4,000 to 6,000 miles from London, and over 6,000 miles respectively). The Treasury estimates that the revenue generated by Air Passenger Duty will be some £3.0 billion in 2013-14,rising to £3.9 billion in 2018-19. Earlier estimates put the revenue as £4.3 billion in 2018-9. The removal of Bands C and D in 2015 is expected to reduce receipts by the Treasury by £0.2 billion a year on average from 2015-16. They anticipate £215 million less in 2015-6 rising to £250 million less in 2018-9. But they anticipate the losses will be this low due to growth in the number of air passengers
.Tweet

New rates of APD after 1st April 2015 compared with during 2014:

Lower rate

Higher rate

2014

From 1.4.2015

2014

From 1.4.2015

Band A. 0 – 2000 miles

£13

£13

£26

£26

Band B. 2000 – 4000 miles

£69

£71

£138

£142

Band C. 4000 – 6000 miles

£85

£71

£170

£142

Band D. Over 6000 miles

£97

£71

£194

£142

The government has announced, in the Budget, that from 1st April 2015, all flights of over 2,000 miles in length from the UK will pay Air Passenger Duty at the rate of £71 for a return flight, rather than the current rates from 2013 of £83 and £94 for Bands C and D respectively. Band C covers journeys of 4,000 – 6,000 miles and Band D is journeys of over 6,000 miles.

Around 120.7 million (about 53%) of the 228 million air trips in 2013 were to or from European destinations (Band A), and some 69.3 million (28%) were longer haul (Bands B, C and D).

Only 9% of air passengers (around 20 million out of 228 million) were in Bands C and D in 2013. That implies that some 49 million trips (ie. 69 – 20) were to or from Band B destinations (2,000 to 4,000 miles). CAA airport data for 2013

Abolishing Bands C and D and applying the Band B rate to those passengers would have reduced APD revenues by £193m in 2012/13, i.e. by 6.7%.

This change will take effect from 1 April 2015 and the Treasury estimates that it will have the effect of reducing APD revenues by £215m in 2015/16, and by £225m, £230m and £250m in the three subsequent years.Exchequer impact (£m)

2014-5

2015 – 6

2016 – 7

2017 – 8

2018 – 9

Exchequer impact

0

– 215

– 225

– 230

– 250

The OBR (Office for Budget Responsibility) forecasts have taken account of this change because they show a dip in APD receipts in 2015/16 before returning to growth.

Air passenger duty (APD) receipts are expected to rise from £3.0 billion in 2013-14 to £3.9 billion in 2018-19. Growth in APD receipts reflects duty rate rises and growth in passenger numbers. Our forecast is slightly lower than in December, reflecting lower-than-expected receipts for the year-to-date and the Budget announcement halving the number of APD bands, which reduces receipts by £0.2 billion a year on average from 2015-16.”

The underlying growth is because of anticipated growth in the volume of passengers and expectation that rates of APD will continue to increase in line with RPI.

There is some benefit of getting rid of Bands C and D. They only account – at present – for some 9% of UK air passengers, and the higher rate of £94 (at the 2013 rate and £97 at the 2014 rate) have been a gift to the airline industry’s PR machine because they allowed them to say that a family of four could pay £376 in APD ( £94 x 4) for their annual holiday, even when flying economy class. The banding also caused some unpopular and rather illogical anomalies, such as the banding of the Caribbean, which were actually closer to the UK than many Band B destinations (as distances were calculated on London to the capital city – very different for some cities in the western USA compared to New York)
£230 million or so, lost to Treasury per year from cheaper long haul flights isn’t a lot in government terms. Perhaps the equivalent to building half /one hospital?

How many of the people who can afford to travel to long haul destinations really need (or would even notice?) an extra APD charge of £14 – 26 ? Yet the loss of that £230 (or so) million would require cuts to be found in some area of public expenditure. Perhaps even on things that benefit those who could not afford the discretionary spending of a long haul leisure flight?

Private jets

The Budget also announced that private jets (which were exempt from APD until 2013 and which environmental groups campaigned for several years to have included) will from April 2015 be subject to 6 times (x6) the economy APD rate per passenger. They presently pay 4x the economy rate.

So, from 1 April 2015, APD for private jet travel will be £78 per passenger(£13 x 6) for Band A destinations (while it is £54 now) and £402 for Band B destinations (while it is £276 now).

The effect of this on total APD receipts is negligible but spare a thought for poor David and Victoria Beckham!

In the 2012 budget, it was first announced that private/business jets (planes with a certified authorised weight of 20 tonnes or more and fewer than 19 seats) would at first pay just double the amount of APD of standard Band rates. This was then increased to X4 for 2014 and will now rise to x6 from 2015

.

APD on business jets – from the 2012 budget:

Air passenger duty (APD) will be extended to smaller aircraft and business jets (5.7 tonnes
threshold), effective from 1 April 2013. Passengers aboard luxury business jet flights will pay new premium rates of APD set at double the business/first class (standard) rates of APD.

The majority of passengers flying aboard business jets will pay APD at the same rates as
passengers aboard commercial flights. To ensure the tax is fair, the Government is
introducing new premium rates of APD for passengers on flights using planes with a certified authorised weight of 20 tonnes or more and fewer than 19 seats. Flights in this category, which tend to offer a luxury service, will pay APD at double the prevailing standard
business/first class rates of APD.

[It is expected to bring in to the Treasury about £5 million each year, from 2013/14 to 2016/17.]